M/s. Kale Khan Mohd. Hanif, Bhopal V. The ACIT, Bhopal

ITA 418/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8006 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-03-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 10-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: PRADEEP GUPTA

Judgement Text

PAGE 1 OF 6 - I.T.A.NO. 418/IND/2009 M/S. KALE KHAN MOHD. HANIF, BHOPAL IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AADFK1421A I.T.A.NO.418/IND/2009 A.Y. : 2006-07 M/S.KALE KHAN MOHD. HANIF, ACIT, IBRAHIMPURA, VS 2(1), BHOPAL BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI PRADEEP GUPTA, ADV. RESPONDENT BY : SMT. APARNA KARAN, SR. DR DATE OF HEARING : 16.03.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-I, BHOPAL , DATED 16.6.2009, FOR THE ASSESSM ENT YEAR 2006-07. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN THIS APPEAL, IN FIRST GROUND, THE ASSESSEE IS AG GRIEVED BY THE DECISION OF THE LD. CIT(A) IN CONFIRMING THE ADDITI ON MADE BY THE ASSESSING OFFICER U/S 41(1) IN RESPECT OF OUTSTANDI NG BALANCE OF ERSTWHILE PARTNERS OF THE ASSESSEE FIRM. PAGE 2 OF 6 - I.T.A.NO. 418/IND/2009 M/S. KALE KHAN MOHD. HANIF, BHOPAL 4. THE FACTS, IN BRIEF, ARE THAT THE A.O. NOTED THAT F OLLOWING SUMS WERE APPEARING IN THE BALANCE SHEET OF THE ASSESSEE FIRM :- S.NO. PARTICULARS OF OUTSTANDING LIABILITIES IN THE BALAN CE SHEET AMOUNT RS. 1. CREDIT BALANCE ON 31,3,2006 IN THE CAPITAL ACCOU NT OF EVICTED PARTNER MOHD. IQBAL. 14,08,164/- 2. CREDIT BALANCE ON 31.3.2006 IN THE CAPITAL ACCOU NT OF PARTNER MOHD. ISLAM WHO DIED ON 14.12.1990 35,936/- 3. CREDIT BALANCE ON 31.3.2006 IN THE CAPITAL ACCOU NT OF PARTNER MOHD. JAVED WHO DIED ON 15.10.2001 79,02,515/- 5. ON A QUERY, THE ASSESSEE EXPLAINED THAT THERE WAS A DISPUTE WITH THE ERSTWHILE PARTNERS MOHD. IQBAL AND OTHER TWO PA RTNERS HAD DIED AND THE PAYMENT TO THEIR LEGAL HEIRS HAD TO BE MADE. TH E A.O. SERVED NOTICE TO VERIFY THE CLAIMS OF THE ASSESSEE. HOWEVER, NONE OF THE LEGAL HEIRS APPEARED. THE A.O. FURTHER FOUND THAT THESE BALANCE S WERE EXISTING SINCE 1997 AND 1999, HENCE, THESE AMOUNTS TO BE TREATED A S A CASE OF CESSATION OF LIABILITY. ACCORDINGLY, HE ADDED THE IMPUGNED BA LANCES TO THE INCOME OF THE ASSESSEE. HE ALSO MADE SIMILAR DISALLOWANCE IN RESPECT OF SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A ), WHO DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPE CT OF CREDITORS AS THESE LIABILITIES WERE STILL OUTSTANDING IN THE BAL ANCE SHEET AND NO PAGE 3 OF 6 - I.T.A.NO. 418/IND/2009 M/S. KALE KHAN MOHD. HANIF, BHOPAL DEDUCTION HAD EVER BEEN CLAIMED BY THE ASSESSEE IN RESPECT OF SUCH CREDITORS, HENCE, PROVISIONS OF SECTION 41(1) WERE NOT APPLICABLE AT ALL. 6. AS REGARD TO THE OUTSTANDING BALANCES IN THE ACCOUN T OF MOHD. IQBAL, THE LD. CIT(A) HELD THAT THE CIVIL DISPUTE W AS RESORTED JUST TO AVOID THE PAYMENT OF TAXES. AS REGARD TO BALANCE OUTSTAND ING IN OTHER PARTNERS ACCOUNT, HE CONFIRMED THE ACTION OF THE A.O. BY REF ERRING TO SOME V.D.I.S. DECLARATION. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND ALSO SUBMITTED THAT IN T HE CASE OF MOHD. IQBAL AT EVERY STAGE, THE ASSESSEE LOST AND THE MAT TER WAS STILL PENDING FOR HEARING BEFORE THE HON'BLE SUPREME COURT AND THE NE XT DATE OF HEARING WAS 26 TH MARCH, 2010, HENCE, THE SAME COULD NOT BE CONSIDER ED AS CEASED LIABILITY. AS REGARD TO OUTSTANDING BALANCE IN RESP ECT OF OTHER PARTNERS, THE LEARNED COUNSEL SUBMITTED THAT THE AMOUNT WAS PAYAB LE AND IT WAS APPEARING IN THE BALANCE SHEET, HENCE, IT COULD NOT BE CONSIDERED AS A CEASED LIABILITY AS WELL. AT THIS STAGE, A QUERY WA S RAISED AS TO WHY THIS BALANCE WAS NOT PAID EVEN AFTER LAPSE OF SUCH TIME. THE LEARNED COUNSEL COULD NOT GIVE EFFECTIVE REPLY. HE WAS ALSO REQUIRE D TO SUBMIT PARTNERSHIP DEED TO SHOW THE PROVISIONS OF PAYMENT IN CASE OF A DECEASED PARTNER OR OUTGOING PARTNER OR TO EXPLAIN THE APPLICABILITY OF THE PROVISIONS OF INDIAN PAGE 4 OF 6 - I.T.A.NO. 418/IND/2009 M/S. KALE KHAN MOHD. HANIF, BHOPAL PARTNERSHIP ACT, 1932. HE, AT THIS STAGE, SUBMITTED THAT HE WAS NOT HAVING THE COPIES OF THE PARTNERSHIP DEED AT THE RELEVANT POINTS OF TIME. 8. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, PLACED STRONG RELIANCE ON THE ORDERS OF REVENUE AUTHORITIE S. 9. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 10. IT IS NOTED THAT IN THE CASE OF SHRI MOHD. IQBAL, T HERE IS A CIVIL DISPUTE BETWEEN THE ASSESSEE FIRM AND HIM. HOWEVER, THIS FACT HAS BEEN NEGATIVELY VIEWED BY THE CIT(A), WHICH, IN OUR OPIN ION, PRIMA FACIE, DOES NOT APPEAR TO BE CORRECT. HOWEVER, SINCE NUMBE R OF PETITIONS/ORDERS HAVE BEEN PASSED BY VARIOUS JUDICIAL AUTHORITIES IN CLUDING THE HON'BLE HIGH COURT, HENCE, THE SAME NEED TO BE TAKEN INTO C ONSIDERATION. FURTHER, IN RESPECT OF OTHER TWO PAYMENTS, PROVISIONS OF PAR TNERSHIP DEED AS WELL AS OF PARTNERSHIP ACT, 1932, IN CASE OF NECESSITY H AVE TO BE EXAMINED TO DETERMINE THE TRUE NATURE OF OUTSTANDING BALANCES I N RESPECT OF TWO OTHER PARTNERS. ACCORDINGLY, WE RESTORE THIS GROUND OF TH E ASSESSEE TO THE FILE OF A.O. TO DECIDE THE SAME AFRESH AS PER LAW AFTER TAK ING INTO CONSIDERATION THE OBSERVATIONS MADE BY US HEREIN BEFORE. WE ALSO MAKE IT CLEAR THAT THE A.O. SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE, WHO SHALL BE AT LIBERTY TO TAKE LEGAL GROUND OF NON-CES SATION OF LIABILITY DUE TO PAGE 5 OF 6 - I.T.A.NO. 418/IND/2009 M/S. KALE KHAN MOHD. HANIF, BHOPAL THESE BALANCES STILL EXISTING IN THE BALANCE SHEET. THE A.O. WILL ALSO TAKE THIS FACT INTO CONSIDERATION 11. THUS, GROUND NO.1 OF THE ASSESSEE STANDS ALLOWED FO R STATISTICAL PURPOSES IN TERMS INDICATED ABOVE. 12. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY AN AD HOC DISALLOWANCE OF RS. 1,59,848/- MADE BY THE A.O. @ 1 0% OUT OF MISC. EXPENSES FOR WANT OF VERIFICATION, WHICH WAS ALSO C ONFIRMED BY THE CIT(A). 13. DURING THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FAIRLY ADMITTED THAT IN THE EARLIER YEAR ALSO SOME AD HOC DISALLOWANCES HAD BEEN MADE AND WERE SUSTAINED BY THE TRIBUNAL ALSO. HOWEVER, THE QUANTUM OF DISALLOWANCE IN THIS YEAR WAS ON HIGHER SIDE. ACCORDINGLY, IN OUR VIEW, THE INTERESTS OF JUSTICE WOULD BE MET IF THE DISALLOWANCE IS RESTRICTED TO RS. 80,000/-. THUS, THIS GROUND OF TH E ASSESSEE IS PARTLY ALLOWED. 14. GROUND NO.3 IS OF CONSEQUENTIAL NATURE, HENCE, NO D ECISION IS REQUIRED THEREON. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. PAGE 6 OF 6 - I.T.A.NO. 418/IND/2009 M/S. KALE KHAN MOHD. HANIF, BHOPAL THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH MARCH, 2010. CPU* 163